The Stock Market

This is Steve Ember with the VOA Special English program IN THE NEWS.

Values of American stocks have fallen sharply in recent trading on United States markets. One measure of the value of American stocks is the Dow Jones Industrial Average. It follows the stock prices of the thirty leading industrial companies in the United States.

Although the Dow had its second largest one-day gain in history this week, it still has lost about fifteen percent of its value in the past month. That is its worst loss since the American stock market problems of Nineteen-Eighty-Seven.

A measure of the wider American market is called the Standard and Poor's Five-Hundred. It follows stock prices of a greater number of leading American companies. These companies are not necessarily industrial. In the past year, the S-and-P 500 has fallen more than thirty percent. That is its worst yearly performance since Nineteen-Thirty-Seven.

The NASDAQ Composite Index is the third main measure of the value of shares of American companies. NASDAQ stands for the National Association of Securities Dealers Automated Quotation System. It is an electronic stock market. Many of the companies on NASDAQ are linked to technology. All buying and selling of NASDAQ stocks takes place on the computer. NASDAQ has lot about thirty-five percent of its value so far this year.

Some experts call the current situation a "bear market." It describes a period when most stock prices are falling as investors sell shares. A "bull market" is the opposite. This is a period when stock prices are climbing.

Financial problems and suspected wrongdoing by American companies are partly to blame for the current bear market. Investors are worried that they might not be able to trust the financial reporting provided by big companies.

For example, the failed energy company Enron is being investigated for possible false reporting. Its financial examiner, the Arthur Andersen company, is close to failure also. Last month, the huge telecommunications company, WorldCom, admitted to falsely claiming thousands of millions of dollars of costs as earnings. It has since declared financial failure and is seeking legal protection from its debts.

The government is investigating the financial activities of some other big companies. Thursday, Congress approved new legislation in an attempt to make the financial reporting of companies honest and open.

The current economic downturn also is the result of too much investment in telecommunications businesses. These are companies that provide telephone, Internet and other electronic communication services. There has been huge growth in the industry in the past several years. Now it appears that demand is less than was expected for telecommunications products and services. This has driven profits down among companies and stock prices have followed.

This VOA Special English program IN THE NEWS, was written by Caty Weaver. This is Steve Ember.